Wall Street Legend: Do US Stocks Fall During the Ten Days of Repentance?
A Wall Street legend suggests US stocks drop during the Ten Days of Repentance. However, upcoming Fed interest rate decisions and inflation data will likely dictate market direction.
A decades-old Wall Street legend claims that during the Ten Days of Repentance—the period between Rosh Hashanah and Yom Kippur—the US stock market tends to decline. According to this theory, investors are advised to sell stocks on the eve of Rosh Hashanah and buy them back after Yom Kippur.
The origin of the legend dates back to 1955, when then-US President Dwight Eisenhower suffered a heart attack during the Ten Days of Repentance. Upon the opening of trading on the eve of Yom Kippur, the Dow Jones index plummeted by about 6.5%, the second-largest daily drop in the history of the US market up to that time.
Is It Just a Legend?
Studies examining market performance over decades have found that a tendency for the market to decline during this period does indeed exist. On average, the S&P 500 index drops by about 0.4% to 0.5% during the ten days, and in more than half of the years, the return during this period was negative.
One explanation offered for the phenomenon is its connection to the Jewish calendar. Wall Street has a significant number of Jewish investors and professionals, many of whom are on vacation during the holidays, which may affect trading volumes and market liquidity. Another explanation relates to the character of these days as "days of judgment" according to Jewish tradition, with some investors potentially influenced by the atmosphere.
Macro Data Overshadows Tradition
However, it is difficult to determine whether this is a direct cause of market declines. Another possible explanation is simply seasonality: the Ten Days of Repentance usually fall during September, historically considered a particularly weak month for the US stock market.
Whether it is a real effect or a legend, this year market performance will likely be driven by a far more significant event: the interest rate decision by the Federal Reserve, scheduled for Wednesday, September 16. Even before the decision, the Consumer Price Index for August will be published, which may heavily influence the Fed's policy path.
